One in three companies has become stricter on the creditworthiness of selecting customers

As many as 34% of finance professionals say their organizations have become more stringent on creditworthiness when accepting new customers. The expected wave of bankruptcies due to repayment of corona support plays an important role in this.

In the Netherlands, more than half of companies (54%) expect late payments to increase in the next 12 months as their customers struggle to meet their obligations. As many as 29% of Dutch companies are concerned that more of their customers will go bankrupt in the near future because companies now really have to pay back the corona support.

Non-payment is a problem that permeates the entire supply chain, with 86% of Dutch companies saying that in the past 12 months they have been asked to accept payment terms longer than they are comfortable with. 73% indicate they actually accepted those longer payment terms because they don’t want to lose customers or because they don’t want to put customers in financial trouble. In the Netherlands, the payment gap (the time between agreed payment terms and the effective payment term) has remained virtually the same; customers evidently need the extra room as well to meet their payment obligations.

This is evident from several recent credit management surveys. In early September, it was revealed that about 43,000 entrepreneurs have not yet paid off a euro of this debt. Starting last September, the Tax Administration started recovering the tax support entrepreneurs received during the corona period. A total of 14.8 billion euros is involved.

Tax authority is a preferential creditor
This means that a claim of the Tax Authority always has priority over unsecured creditors. This causes 2 main risks for “ordinary” suppliers; The first risk is that your debtors go bankrupt because they cannot pay the corona debt. Then there will be little to nothing left for them. The second risk is that your customer does not get their invoices paid or gets paid later because his customers first have to repay the corona debt.

With as many as 60,000 companies now having to do everything they can to repay their debts to the tax authorities, these are serious risks. It is therefore very wise to check your customers, especially new customers, for their creditworthiness. But especially by taking immediate action when a customer fails to pay his invoice. The chance that you will be left out as an unsecured creditor is much smaller.

Source: MODINT Credit & Finance
Photo: Shutterstock

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